Congratulations, you’re here because you’re ready to take charge of your student loans.

We can help you understand the difference between consolidating and refinancing student loans—and figure out what option is best for your future.

What is student loan consolidation?

Consolidating your federal student loans with a Direct Consolidation Loan from the government, for example, involves gathering all your loans under one new loan. With consolidation, you now have only one bill due each month.

While this can make your life easier from a payment perspective, you will not save any money as your new interest rate with a consolidation loan is a weighted average of your existing rates.

How does a weighted average work? If you have a $10,000 loan with a 6% interest rate and another $5,000 with 5%, and you’re planning to pay them off in 10 years. Your new rate would be 5.67%. The calculation works like this: As $10,000 is ⅔ of your total loan balance and $5,000 is ⅓, you’d multiply each interest rate by that fraction and add the results: (⅔ * 6% + ⅓ * 5% = 5.67%).

Consolidating your loans may be a good option if you’re happy with your rates, you are planning to use an income-based repayment program, or refinancing is not the right fit for you at this time. You can stretch your term out with a consolidation loan, and that may lower your monthly payment even though you may pay more over time.

You can always refinance your consolidated loans at a later point in time.

What is student loan refinancing?

When refinancing your student loans, you get a new loan with a private lender such as Earnest and pay off your existing loans. You will only have one bill to pay each month when you refinance all your loans.

However, it’s different than consolidation because you also get a new interest rate—and your new interest rate can help you save money over the life of the loan. At Earnest, our clients save an average of more than $21,000 by refinancing their student loans. (You can learn more about Earnest calculations in disclaimers available at Earnest.com)

You can also change the length of your repayment to be shorter or longer, according to what you can afford to pay each month with Earnest’s Precision Pricing feature. You also have the option to pick between a variable and a fixed rate for your new loan.

With refinancing, you are not only consolidating your loans, but you are also getting a new loan with improved terms.

You can refinance both federal and private student loans. This includes all types of federal loans, including Direct Loans, Stafford Loans, PLUS Loans, as well as private loans.

It’s important to note that when you refinance, you can decide which loans you want to refinance and which, if any, you’re happy to keep at their current terms. Some people may want to refinance all their loans, and for other it may make sense to only refinance some of them.

When you refinance federal loans and private loans into a one new private loan you will no longer be eligible to use one of the government’s income-based repayment programs.

To decide, you should look at the terms for each of your current loans—and whether refinancing can help you do better. You can get an estimated rate from Earnest in just two minutes.

Disclaimers

Explanation of $30,939 Average Client Savings

Average savings calculation is based on all Earnest clients who refinanced student loans owned and serviced by Navient between 03/06/2017 and 03/31/2018. The savings figure of a particular client is calculated by subtracting the projected lifetime cost of their Earnest refinancing from the projected total cost of their original student loans.

How we calculate the figures:

For the original student loans, the projected lifetime costs are calculated using the weighted average term of the original loans and the weighted average interest rate in effect in the month prior to the refinance event, including borrower benefits (e.g. automatic payment discounts).

For the refinanced loans, projected lifetime costs are calculated using the selected Earnest term and interest rate, also including borrower benefits.

Projected lifetime costs assume a principal balance of $75,000.

Projected monthly savings is derived by using the “projected lifetime savings” divided by the selected Earnest term

In order to calculate our average client savings, we excluded:

Savings from any client that selected an Earnest loan with a longer term than their Navient student loan terms

Loans resulting from a client refinancing the same Earnest loan with Earnest

Average client savings amount is not predictive or indicative of your individual cost savings. For example, your individual savings may differ based on your loan term and rate type selections, if you change your repayment options, or if you pay off your student loans early.

Rates shown include 0.25% APR reduction when client agrees to make monthly principal and interest payments by automatic electronic payment. Use of autopay is not required to receive an Earnest loan.

Explanation of Precision Pricing™ Savings

Savings calculations are based on refinancing $121,825 in student loans at an existing loan servicer’s interest rate of 7.5% fixed APR with 10 years, 6 months remaining on the loan term. The other lender’s savings and APR (light green line) represent what would happen if those loans were refinanced at the other lender’s best fixed APRs. The Earnest savings and APR (white line) represent refinancing those loans at Earnest’s best fixed APRs.

Savings is computed as the difference between the future scheduled payments on the existing loans and payments on new Earnest and “other lender” loans. The calculation assumes on-time loan payments, no change in interest rates, and no prepayment of loans.

Client Testimonials

Individuals portrayed as Earnest clients on this site are actual clients and were compensated for their participation.